Homeowner??s Insurance: You May Not Have the Coverage You Need

Before you go, we thought you'd like these...
If you think that your standard homeowner’s policy covers all types of property damage, think again.
According to the National Association of Insurance Commissioners, typical property and liability insurance policies do not cover home damage from floods and other problems.
So what’s a savvy homeowner to do?
NAIC Chairman and Alabama Insurance Commissioner Walter Bell has some starting advice. “As we enter the 2007 hurricane season, we strongly encourage

If you think that your standard homeowner’s policy covers all types of property damage, think again.

According to the National Association of Insurance Commissioners, typical property and liability insurance policies do not cover home damage from floods and other problems.

So what’s a savvy homeowner to do?

NAIC Chairman and Alabama Insurance Commissioner Walter Bell has some starting advice. “As we enter the 2007 hurricane season, we strongly encourage consumers in flood-prone areas to check whether they are properly covered,” he said. “Many homeowners could be seriously harmed financially by misunderstandings about their insurance.”

Common Confusion

According to the NAIC, most standard homeowner’s policies do not provide coverage for these occurrences:

• Theft of or damage to vehicles such as cars, boats and motorcycles that are on your property

• A break in the water line on your property

• A break in the sewer line on your property that connects to your municipal sewer system

• Earthquake damage

• Mold damage

• Damages from termites or other infestation

• Pets that are stolen from or injured on your property

And new survey data from the NAIC reveals that some homeowners don’t know how they will be paid out in the event of a covered loss.

Twenty-four percent of respondents said their policies insured their homes for the actual cash value, while 64 percent said their policies covered the replacement cost. Another 12 percent said they didn’t know which type of coverage — actual cash value or replacement cost — they purchased.

Not knowing the difference could cause problems, according to Bell, because an actual cash value payout, which considers depreciation, could be thousands of dollars less than a benefit calculated at a replacement cost, which does not consider depreciation.

Get the Coverage You Need

Your first line of defense is to check your homeowner’s insurance policy and talk to your agent. You need to know what your insurance currently covers in order to find out what you need.

Once you know what’s not covered, you can begin to research additional policies.

Flood insurance. If you find that your homeowner’s policy doesn’t cover flooding — and most don’t — investigate getting insurance coverage through the National Flood Insurance Program, which is managed through the Federal Emergency Management Agency.

According to the program's Web site, this insurance guarantees compensation for flood damages because it’s backed by the Federal government.

Liability insurance. The NAIC survey found that 28 percent of homeowners are more concerned today than they were five years ago about being the target of a lawsuit. (This concern is understandable, as a recent study from the Pacific Research Institute in California says that America “wastes $589 billion each year from excessive tort litigation.”)

Since you can be held liable for accidents that happen on your property, the NAIC says that you can better protect yourself against lawsuits by adding umbrella liability coverage to your insurance policy.

And the NAIC also offers another hint: add insurance coverage as you make major home improvements and acquire expensive possessions. In general, you should make sure that you’re not underinsured.

Read Full Story

Find a Home

Buy
Rent
Value
Powered by Zillow

People are Reading